Regional growth broadens even as unemployment climbs nationwide
New Zealand's economy expanded more than expected in the June quarter, with growth broadening across every region even as unemployment continued to climb and uncertainty builds ahead of this year's general election, RNZ reported.
Provisional estimates from the Infometrics June 2026 Quarterly Economic Monitor show economic activity rose 2.6% in the quarter and 1.7% over the year, a result stronger than many had feared given the ongoing Middle East conflict.
Growth broadens but jobs lag behind
All 16 regional economies expanded over the June 2026 year, according to Infometrics principal economist Nick Brunsdon (pictured), with the recovery no longer confined to traditional strongholds.
"Growth continues to be led from the south, with Southland, Otago, Canterbury, and Nelson-Tasman all growing at over 2% in the year to June 2026," Brunsdon said, adding that "parts of the North Island are joining in too, with strong growth seen in both Waikato and the Bay of Plenty."
Employment growth has lagged the broader recovery, with job numbers rising just 0.4% nationally in the quarter — including a 0.3% lift in Auckland — marking the end of a two-year decline. Six regions still recorded job losses over the quarter, and the unemployment rate has continued to rise as demand for work outpaces a still-low volume of job advertisements.
The unemployment rate climbed to an 11-year high of 5.6% in the June quarter, according to Stats NZ figures, though Westpac expects it to ease to 4.9% by the end of 2027 as growth gathers pace.
Household spending remains cautious despite the upturn
Brunsdon said the stronger-than-expected result partly reflects a low base from the previous year rather than a full rebound.
"Despite the clear economic headwinds from conflict in the Middle East, economic activity might not have been as badly hit as first feared," he said, citing a weaker prior-year base and a smaller-than-expected hit from the Iran War as key factors, alongside a strong primary sector.
Even so, households remain wary: Marketview card spending data shows spending rose just 0.6% in the year to June, with Infometrics estimating spending volumes actually fell 1.5% once retail inflation is accounted for.
Brunsdon cautioned that the recovery's pace remains uncertain.
"We remain concerned about the pace of recovery over the rest of 2026 amid continued global uncertainty," he said.
RBNZ tightening set to continue into September
The recovery comes as the Reserve Bank presses ahead with further tightening. Westpac and ASB both expect the RBNZ to lift the OCR by 25 basis points to 2.75% at its 2 September Monetary Policy Statement, though the two banks diverge on how much further the cycle will run, with Westpac's neutral-rate assumption implying more hikes ahead than ASB currently forecasts. Kiwibank agrees a hike to 2.75% is all but locked in, and expects a third move to 3% in October, but argues the RBNZ should stop there — well below the 3.65% the wholesale market has priced in for December 2027.
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